New highs in gold prices are leading to net redemption in gold exchange-traded funds (ETFs) even as investors are increasingly looking at this category for diversification of their portfolios. With the listing of Reliance gold ETF on the National Stock Exchange (NSE) yesterday, four fund houses (Benchmark, UTI Mutual Fund and Kotak Mutual Fund being the other three) currently offer gold ETFs to Indian investors. Their assets under management (AUM) under gold ETFs is estimated at about Rs 500 crore.
Industry officials said UTI Mutual Fund had seen redemption of Rs 5.63 crore in November, while Kotak MF had witnessed redemption for Rs 5.14 crore in the same period. Benchmark executives did not disclose the redemption figures, adding that they would clear only by the end of the month.
Gold ETFs are open-ended mutual fund schemes that invest the money collected from investors in standard gold bullion (0.995 purity). Investors’ holding is denoted in units, which get listed on a stock exchange. These are passively managed funds and are designed to provide returns that would closely track the returns from physical gold in the spot market. Though Kotak’s gold ETF has added Rs 10 crore in the last 2-3 months, new highs in gold prices are leading to some redemption now. “Gold prices have created new highs at the $800 level. But if gold continues to remain at this price for some more time, investors will begin to put in money into the gold ETF once again,” said Ritesh Jain, a fund manager of Kotak gold ETF.
UTI Mutual Fund’s Goldshare had AUM of Rs 142 crore as of November 27. Industry observers feel gold ETFs are picking up slowly. An indication of this is the fact that the latest entrant, Reliance Mutual Fund’s gold ETF, managed to mop up Rs 146 crore in its new fund offering. The fund got listed on November 26
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